Is there a big expectation error in euro-zone interest rate markets?

Investors do not believe that the ECB will raise its interest rates significantly after the summer of 2019. This means that if it does raise them , which it seems to be signalling at present , then once this hike is expected there will be upward correction s in interest rate expectations and in long- term interest rates in the euro zone. But could the ECB decide to not raise its interest rates after the summer 2019? Unit labour costs are accelerating, primarily due to the partial indexation of nominal wages to inflation and to the effect of rising oil prices on inflation . C ore inflation in the summer of 2019 should therefore allow the ECB to raise its interest rates , especially if oil prices continue to rise ; Euro-zone growth is slowing under the effect of the rise in oil prices and the return of the unemployment rate to the vicinity of the structural unemployment rate. Could this growth slowdown be sufficient to stop the ECB from raising its interest rates? This may be the case if a n amplifying mechanism came into play and the growth slowdown led to a slowdown in corporate or housing investment. Current growth in the euro zone, while lower than in 2017, would allow the ECB to raise its interest rates. The E CB certainly wants to at least partially normalise its interest rates after the summer of 2019. Inflation in the euro zone will allow it to. Growth in the zone will be low, but not very low unless investment falls sharply. For now, the most central scenario is a limited and slow increase in the ECB’s interest rates starting in September 2019.